Taiwan says chipmakers will prioritize auto chips amid global shortage

TAIPEI -- Major Taiwanese chipmakers are willing to prioritize supplies for automakers amid a global shortage of chips for the industry, the island's economics minister said after meeting with company executives.

Automakers around the world are shutting assembly lines due to the shortages, which in some cases have been exacerbated by the former U.S. administration's actions against Chinese chip factories.

"Chipmakers are willing to follow the government's request and try to support auto chips as much as they can to support production in the U.S., Europe and Japan," Economics Minister Wang Mei-hua told reporters.

The issue has become a diplomatic one, with German Economy Minister Peter Altmaier writing to Wang to ask her for help in addressing the problem. Wang also said the U.S., European Union and Japan had also been in contact.

The chipmakers are prepared to negotiate with clients of other products to see which clients are willing to delay or cut orders and will try to boost production, Wang said.

"For example, if their capacity is at 100 per cent now, they will try to raise it to 102 per cent or 103 per cent, with the extra capacity going to make auto chips," she said.

Wang met executives from Taiwan Semiconductor Manufacturing Co, United Microelectronics Corp., Powerchip Semiconductor Manufacturing Corp. and Vanguard International Semiconductor Corp.

Vanguard declined comment ahead of quarterly earnings next week but noted the company's chairman had said this month he expects a 15 per cent increase in demand for auto chips this year.

The other three companies did not immediately respond to requests for comment.

TSMC has already said it will prioritize production for automakers if it is able to further increase capacity, Taiwan's Economics Ministry said on Monday.

The chip suppliers told Wang that they were at working at full capacity. Business is booming for Taiwan's tech companies as the COVID-19 pandemic and the shift to remote work drive demand for laptops, tablets and smartphones.

She said chipmakers had said they had warned automakers early last year that they were taking a risky approach if they cut orders at time of strong growth in demand for chips for electronics.

The shortage has affected automakers including Volkswagen Group, Ford, Subaru, Toyota, Nissan, and Stellantis.  A Stellantis plant and Honda plant in Ontario have been affected by the shortage.

"This appears to be long-term demand so it will take some time to solve the problem," Wang said.